SALIGRAM RUPLAL KHANNA & ANR versus KANWAR RAJNATH

Citation: [1975] 1 S.C.R. 358 · Decided: 01-05-1974 · Supreme Court of India · Bench: HANS RAJ KHANNA · Disposal: Dismissed

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Judgment (excerpt)

358 
SALIGRAM RUPLAL KHANNA & ANR 
v. 
KANWAR RAJNATH 
May, I, 1974 
[H. R. KHANNA, M. H. BEG, AND Y. V. CHANDRACHUD, JJ.j 
A 
Indian Partnership Act. ss. 42 and 47-Scope of-Dissolution of a finn 
B 
constituted for a fixed term-Mutual rights and obligations of partners after 
dissolution suit for rendition of aCC'o1111f's-Lin1!tation. 
A partnership consisting of the appellants and the respondent had entered 
into a lease agreement· with the Custodian of Evacuee Property in respect of 
a mill and took possession of the mill on 31st August, 1952. The period of 
partnership was for 5 years being tne period of the said lease. 
The partners 
having failed to pay one instalment of rent the Custodian served on the 
C 
partners a show cause notice on 12-2-54 why thi; lease should not be terminat-
ed. 
On account of certain financial difficulties the parties entered into · a 
second agreement on February 24, 1954. 
Disputes having arisen between appellants and the respondent, the appellants 
filed a suit on De~ember 20. 1960 alleging lhat after the termination of' the 
lease by the Custodian on May 25, 1954 the two appellants and the respon-
dent had orally agreed not to dissolve the partnership in spite of the termina-
tion of the lease and prayed for a declaration that the partnership between 
D 
them and the respondent , was still subsisting on the tern1s and conditions set 
out in the partnership deed dated 24th February, 1954. 
They also prayed 
for rendition of the partnership accounts. The respondent on. the other hand 
alleged that there was no oral agreement between the parties and that the 
claim for rendition ·of accountS was barred by limitation. 
The trial court held that the appellants had failed to prove that there 
was an oral agreement between the parties and that the clai.m for rendition 
of accounts was barred by limitation. 
E 
On appeal the High Court upheld the findings of the trial court. 
Dismissing the appeal, 
HELD :-( 1) No inference of' implied agreement can be drawn from the 
rnaterial on record. 
[371 E] 
According to section 42 of the Indian Partnership Act. subject to a con-
tract between the partners a firm is dissolved if constituted for a fixed term 
by the expiry of that term. This provision makes it clear that unless some 
contract between the partners to the contrary is proved, the firm, if constituted 
for a fixed te.rm \VOu\J be dissolved by the expiry of that tern1. 
[371G-Ji] 
In the instant case it was indicated in the agreement of partnership· that 
the period of partnership had been fixed at 
5 years bei.:ause that was the 
period of the lease of the mills and the lease was _terminated on bi1ay 25, J 954. 
[372B-C] 
According to s. 47 of the Tndian Partnership Act after the dissolution 
of the firm the authority of each partner to. bind the firm and the other mutual 
rights and obligations of the pa1tr.·~rs continue notwithstanding the dis·solution 
so far as may be necessary to win.d up the affairs of the firm and to com-
plete transactions begun but unfinished. at the time of dissolution but not 
otherwise. The· word 'transaction' in section 47 refers not merely to a com-
mercial transaction of purchase and sale but 
would include also all other 
matters relating to the affairs of the partnership. The completion of a tran-
saction would cover also the taking of necessary steps in connection with the 
adjudicati'on of a dispute t~ whic? the firm before. its dis~olution was a party. 
In the instant case after dissolution. the partnership subsisted merely for the 
purpose of completing pending 
transactions, winding up the business 
and 
F 
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• 
B 
c 
D 
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E 
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s. R. KHANNA v. RAJNATH (Khanna, J.) 
359 
adjusting the rights of partners anQ for these purposes and. these only the 
authority, rights <ind obligations of the partners continued. [374B·D, F-G] 
(3) The suit i'or rendition of accounts brought by the appellants on De-
cember 20, 1960 was barred by limitation. In the absence of a contract to 
the contrary there could be no survival. of the firm after August 30, 1957 
when the period of partnership expired. [373D-F] 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 143 of 1969 . 
(Appeal by Special Leave from the Judgment & Decree 
dated 
the 22nd March, 1968 of the Bombay High Court in Civil Appeal 
'.'Jo. 23 of 1963). 
S. T. Desai, K. L. Hathi and P. C. Kapur for the appellants. 
K. S. Cooper, A. B. Diwan, Vasant Kotwal and I. N. Shroff for

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